| Abstract: |
North, with many other Samuelsonian economists, thinks of “institutions” as
budget constraints in a maximization problem. But as Clifford Geertz put it,
an institution such as a toll for safe passage is “rather more than a mere
payment,” that is, a mere monetary constraint. “It was part of a whole complex
of moral rituals, customs with the force of law and the weight of sanctity.”
The Geertzian metaphor of negotiation and ritual makes more sense than the
metaphor of a mere budget constraint. Meaning matters. North in particular
thinks that the budget line of anti-property violence was shifted in the late
17th century. It was not: on the contrary, England was a land of property
rights from the beginning. So “institutional change” does not explain the
Industrial Revolution. The timing is wrong. Incentive (Prudence Only) is not
the main story, and cannot be the main story without contradiction: if it was
Prudence Only the Industrial Revolution would have happened earlier, or
elsewhere. Other virtues and vices mattered—not only prudence, beloved of the
Samuelsonians; but temperance, courage, justice, faith, hope, and love, which
changed radically in their disposition in the seventeenth and eighteenth
centuries. Sheer commercial expansion is routine and predictable and
ill-suited therefore to explaining the greatest surprise in economic history.
The Glorious Revolution of 1689, which North and Weingast have cast in a
central role, merely made the British state effective. It did not change
property rights, as economists such as Darin Acemoglou have supposed, on the
basis of North’s tale. North praises patents and incorporation laws, neither
of which had much impact in the Industrial Revolution. The 18th century, in
other words, was not a century of “institutional change.” Nor is the entire
absence of property relevant to the place or period. Richard Pipes argued it
was relevant, on the basis of the Russian case. Yet only in society’s
dominated by Steppe nomads was property weak---in Europe in the 16th and 17th
centuries, as in China then, it had been strong for centuries past. The
Stuarts were not princes of Muscovy. And indeed private property characterizes
all settled human societies. |